Chapter 3

a change in the quantity demanded at every price.

Shift in Demand

When economists talk about supply, they are referring to a relationship between price received for each unit sold and the ________________. a. demand schedule b. market price c. quantity supplied d. demand curve

quantity supplied

what a buyer pays for a unit of a specific good or service.

Price

the amount that a seller is paid for a good, minus the sellers actual cost.

Producer Surplus

a change in the quantity supplied at every price.

Shift in Supply

Refer to Figure 3-3. A change from Point A to Point E represents a(n): a. increase in supply. b. decrease in supply c. increase in quantity supplied. d. decrease in quantity supplied.

decrease in supply

A supply curve is a graphical illustration of the relationship between price, shown on the vertical axis, and _________________, shown on the horizontal axis. a. demand b. quantity c. quantity supplied d. quantity demanded

quantity

other things being equal

Ceteris Paribus

goods that are often used together so that consumption of one good tends to enhance consumption of the other

Complements

at the given price the quantity demanded exceeds the quantity supplied.

Excess Demand, Shortage

a product whose demand rises when income rises, and vice versa.

Normal Good

_____________ refers to the total number of units that are purchased at that price. a. quantity b. quantity demanded c. supply d. market quantity

quantity demanded

A severe freeze has once again damaged the Florida orange crop. The impact on the market for orange juice will be a leftward shift of: a. the supply curve. b. the demand curve, as consumers try to economize because of the shortage. c. both the supply and demand curves. d. the supply curve and a rightward shift of the demand curve, resulting in a higher equilibrium price.

the supply curve

Refer to Figure 3-1. Using the graph above and beginning on D1, a shift to D2 would indicate a(n): a. increase in quantity demanded. b. decrease in quantity demanded. c. increase in demand. d. decrease in demand.

increase in demand

When quantity demanded decreases in response to a change in price: a. the demand curve shifts to the right. b. the demand curve shifts to the left. c. there is a movement down along the demand curve. d. there is a movement up along the demand curve.

there is a movement up along the demand curve

the loss in social surplus that occurs when the economy produces at an inefficient quantity.

Deadweight Loss

the relationship between price and quantity demanded of a certain good or service.

Demand

the amount that individuals would have been willing to pay, minus the amount they actually paid.

Consumer Surplus

shows the relationship between prices and quantity demanded on a graph

Demand Curve

keeps prices from rising above a certain level.

Price Ceiling

the common relationship that a higher price leads to a greater quantity supplied and a lower price leads to a lower quantity supplied.

Law of Supply

Any given demand or supply curve is based on the ceteris paribus assumption that _________________________. a. everything is variable. b. all else is held equal c. no one knows which variables will change and which will remain constant. d. what is true for the individual is not necessarily true for the whole.

all else is held equal

Refer to Figure 3-2. A change from Point A to Point B represents a(n): a. increase in demand. b. decrease in demand. c. decrease in quantity demanded. d. increase in quantity demanded.

decrease in quantity demanded

Andy views beer and pizza as complements to one another. If the price of pizza decreases, economists would expect: a. Andy's demand for pizza to increase. b. Andy's demand for pizza to decrease. c. Andy's quantity of pizza demanded to decrease. d. Andy's demand for beer to increase.

Andy's demand for beer to increase

the situation where quantity demanded is equal to quantity supplied

Equilibrium

the price where quantity demanded is equal to quantity supplied.

Equilibrium Price

the quantity at which quantity demanded and quantity supplied are equal for a certain price level.

Equilibrium Quantity

at the existing price, quantity supplied exceeds the quantity demanded.

Excess Supply, Surplus

a product whose demand falls when income rises, and vice versa.

Inferior Good

the resources such as labor, materials, and machinery used to produce goods and services.

Inputs

the common relationship that a higher price leads to a lower quantity demanded of a certain good or service and a lower price leads to a higher quantity demanded.

Law of Demand

laws that government enact to regulate price.

Price Control

keeps prices from falling below a given level.

Price Floor

the total number of units that consumers would purchase at that price.

Quantity Demanded

the total number of a good or service producers are willing to sell at a given price.

Quantity Supplied

the sum of consumer surplus and producer surplus.

Social Surplus

a good or service that we can use in place of another good or service.

Substitute

the relationship between price and quantity supplied of a certain good or service.

Supply

a graphic illustration of the relationship between price and quantity.

Supply Curve

a table that shows the quantity supplied at a range of different prices.

Supply Schedule

The nature of demand indicates that as the price of a good increases: a. suppliers wish to sell less of it. b. more of it is produced. c. more of it is desired. d. buyers desire to purchase less of it.

buyers desire to purchase less of it

A table that shows the quantity demanded at each price

demand schedule

If a firm faces _____________________, while the prices for the output the firm produces remain unchanged, a firm's profits will increase. a. higher demand b. lower costs of production c. equilibrium d. a shift in demand

equilibrium

The _________ is the only price where quantity demanded is equal to quantity supplied. a. equilibrium price b. horizontal axis intercept c. vertical axis intercept d. market price

equilibrium price

The _______________ is the quantity where quantity demanded and quantity supplied are equal at a certain price. a. quantity demanded b. equilibrium quantity c. demand schedule d. supply schedule

equilibrium quantity

Economists refer to the relationship that a higher price leads to a lower quantity demanded as the _____________________. a. income gap b. market equilibrium c. law of demand d. price model

law of demand

The demand curve for a typical good has a(n): a. negative slope because some consumers switch to other goods as the price rises. b. negative slope because consumer incomes fall as the price of the good rises. c. negative slope because the good has less "snob appeal" as its price falls. d. inverse slope because as the price goes up, the good has more profitability.

negative slop because some consumers switch to other goods as the price rises

___________________ are enacted when discontented sellers, feeling that prices are too low, appeal to legislators to keep prices from falling. a. Rent controls b. Price ceilings c. Price floors d. Subsidies

price floors

The downward slope of the demand curve again illustrates the pattern that as _____________ rises, ______________ decreases. a. quantity demanded, price b. quantity supplied, quantity demanded c. price, quantity demanded d. price, quantity supplied

price, quantity demanded

According to the law of supply: a. there is a direct relationship between price and the quantity supplied. b. there is an inverse relationship between price and the quantity supplied. c. there is a direct relationship between price and quantity demanded. d. there is an inverse relationship between price and quantity demanded.

there is a direct relationship between price and the quantity supplied

But nearly all supply curves share a basic similarity: they slope ________________. a. down from left to right b. up from left to right c. up from right to left d. down from right to left

up from left to right